SEFA grant provides key support for Morocco wind project

A US $960,000 Sustainable Energy Fund for Africa (SEFA) grant for the Jbel-Sendoug (Khalladi) Wind Project in Northern Morocco was approved at the end of December 2013 to support outstanding preparation activities to bring the project to bankability. SEFA support will be key to unlocking the equity and debt required for implementation of this private sector-led wind project and realizing significant socioeconomic outcomes from the provision of cleaner, more reliable and affordable electricity.

The wind energy project will be developed near the Mediterranean coast, 15 kilometres east of Tangiers. The project involves the development, financing, construction and operation of a 120-MW wind power facility under an Independent Power Producers scheme authorized through a concession granted by the Ministry of Energy, Mines, Water and Environment. The project will see the construction of a 23-km transmission line and a substation to evacuate energy generated by the facility into the interconnected grid.

Following the approval, Alex Rugamba, Director of the African Development Bank’s Energy, Environment and Climate Change Department, noted, “For SEFA, this project is a double win as it involves clean energy production that will in turn spur economic growth. When finished, the Khalladi Wind Energy project will provide more reliable power, fewer power outages and greater scope for private sector growth in the project region. This grant is evidence of the Bank’s continued strong commitment to renewable energy investments in Morocco.”

SEFA is stepping in to support the roll-out of the project and to assist in its financing. The grant will support the optimal structuring of a multi-Power Purchase Agreement set-up with industrial firms to ensure bankability. More specifically, the SEFA grant will finance a legal advisor to UPC Morocco Wind Partners B.V., the project sponsor, as well as advisors – legal, financial and insurance – to lenders. And in a post-Kyoto environment, where dwindling support for renewable energy has placed pressure on the profitability of new projects, the SEFA financing will help bridge the gap on outstanding pre-investment activities required for financial close.

When complete, the Jbel-Sendoug (Khalladi) wind energy project will increase the provision of electricity where demand growth is strong. This will result in energy savings as the Moroccan population relies on their own generators at times of power outage. Those savings will contribute to increasing their purchasing power for other goods and services and stimulate consumption and investment. Yet another benefit of the project is that it is expected to avoid the emission of approximately 175,000 tons of CO2 equivalent per year.

The electricity produced by the facility – an average of 340 GWh per year – will be sold primarily to industrial users as well as with the Office national de l’électricité et de l’eau potable (ONEE) buying any remaining balance.

Morocco currently imports 97 per cent of its energy needs and satisfies approximately 75 per cent of its energy needs from fossil fuels (primarily coal, oil and natural gas), leaving the country vulnerable to market price fluctuations with severe impacts on the budget deficit and the national carbon footprint. Over the past 20 years, the country has moved from having a surplus electricity balance to a deficit and from being a net electrical energy exporter to a net importer. This has come about primarily as a result of surging domestic demand with average energy growth rates of approximately 7.5 per cent per annum.